The dynamics of business ethics and economic activity

Noe, Thomas and Rebello, Michael (1994) The dynamics of business ethics and economic activity. The American Economic Review, 84 (3). pp. 531-547.


The authors model the agency relationship between managers and investors. Through socialization, ethical managers develop internalized norms that prevent them from acting opportunistically. Unethical managers lack these norms. Higher ethical standards on the part of managers increase economic activity in the short run. However, increased economic activity increases opportunities to profit from unethical behavior, eroding ethical standards over the long run. When this rate of erosion is high, cycling of ethics and economic activity emerges. Otherwise, ethics and economic activity converge to a stable long-run limiting value.

Item Type: Article
Keywords: Business ethics; Economic activity; Executives; Capitalists & financiers; Business enterprises; Profit; finance
Subject(s): Finance
Date Deposited: 26 Feb 2012 11:57
Last Modified: 02 Mar 2017 11:04
Funders: N/A

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